DHL: Friend or Foe?

As makers of volume products search for ways to increase their margins through cost reductions, the ability of logistics ‘integrators’ such as DHL are becoming increasingly valuable. But is that good news or bad for you?

Examining the dilemma|~||~||~|DHL Worldwide Express wants to help companies streamline their supply chains. Though that may sound like the opening line of a corporate press release, there is really no more succinct way to describe the purpose of the systems and processes it has developed in recent years.

To describe the effect this may have on current channel structures however calls for a more analytical range of positive and negative emotions. In a nutshell, you are either in danger of seeing your business model improve dramatically, or of being run out of town. Which side of the line you fall on is perhaps something you can alter, but you will have to decide sooner or later—or the decision will be made for you.

Let’s examine the dilemma: the volume computer industry is one in which the quest for greater profits is longer and more complicated, year on year. As the issue becomes more acute, one truth seems to be holding more sacred than most: the less money you spend, the better you are at your game. The less money you spend getting your products to market, that is. The less you spend on on-the-ground personnel, and a redundant partner network for products that, frankly, are no longer all that complicated.

If we accept that prices are going to continue to go down, and the profit growth will be in greater volumes and lower overall costs, then something starts to become apparent. The Middle East volume channel model needs a serious overhaul.||**||A segmented approach|~||~||~|DHL’s general manager for the UAE, David Wild says he has no specific mission to change the way computer vendors go to market as such. Still, there is no doubt that the DHL network of planes, trucks, customs relationships, and international depots makes an argument all of its own. The industry is changing, and organisations such as DHL, UPS, and FedEx have skills and capabilities which are sorely needed.

They also have an increased focus. “When [dealing] with an industry, we have segmented our approach to our customers, globally and locally, in order to deal with the different customer segments appropriately,” Wild told CRN.

“What that means is, we have cut the customer base up considerably. We are looking at specific industries and specific needs within those industries. So as we are learning about the computer industry for instance, we know that there are specific requirements that they have, and we’ll be able to plan for where they want to get to in the future. And we will build solutions to try and satisfy those,” said Wild.

The building of individual solutions is something about which DHL has a lot of flexibility, and the mission is to solve specific customer requirements beyond the shipping of boxes.

“And whether that is direct to an end user, [and] not to the reseller sometimes, we will satisfy that requirement of that company’s supply chain model,” said Wild.||**||The ideal theoretical model|~||~||~|The reality for many resellers and distributors is that with this kind of focus on corporates from DHL and others, they may end up being simply a redundant layer of cost. Consider the possibilities: DHL, with freight forwarding firms such as DANZAS—with whom DHL has a close relationship—could provide virtual on-the-go warehousing solutions for low-margin Far Eastern companies, for example. By extending the shipment tracking systems which DHL has built out to the vendor, they could conceivably keep their stock in transit permanently, allocating it to resellers—or even end users, along the way—they having placed orders over the Web.

Products leave the factory in Taiwan, and are bulk shipped by low-cost sea freight, to Dubai. Whilst still at sea, those shipments are virtually broken down and allocated to various resellers in Jeddah, Riyadh, and Doha. When the ship docks in Dubai—and whilst another is already on the high seas—DHL takes over the delivery process, loading those broken-up shipments onto Saudi Arabia and Qatar-bound trucks, and the delivery takes place.

The partnership between DANZAS and DHL ensures that the whole process is seamless, so that the reseller basically sees no difference. On the contrary in fact; DHL systems are a great improvement over that which resellers are used to. Web-based tracking systems mean that resellers can check on their own orders instantaneously. More than that, the extension of DHL’s systems out to the Taiwanese vendor means that resellers can log onto their vendor supplier’s extranet—just as they do to place orders—and see DHL’s information on their shipments that way.

“It may be just as simple as connecting our customer service systems to the systems of our customers. We don’t do that for every customer, but if for whatever reason, that connection adds value to our customer’s customer’s satisfaction with that relationship then that is what we will be doing,” Wild told CRN.||**||The building blocks revealed|~||~||~|The service to resellers really may be no different, but the absence of an entire layer of middleman in the channel strips away a costly element, increasing both vendor and reseller margins.

“I guess [delivering those extra services] is in essence, what we are really doing right now. We have robust products, we can deliver things from A to B, that is what an express company does. But what we are now doing is trying to make sure we are able and we have the resources to understand our customers better, try to forward think to where they are all trying to get to,” Wild told CRN.

“Lets look at what a company like DHL has, the building blocks of our business. The job we are paid to do, is to take something from a customer, and deliver it to somewhere else in the world as quickly as it is possible to do.

“But the building blocks are exactly the same, we deliver documents, we deliver packages, and we deliver the information that gives the comfort and the visibility that goes all around them,” said Wild.

Although the concept of the ‘virtual warehouse in motion’ may not present a challenge to resellers’ livelihood today, the building blocks which DHL has in place locally already, point to its obvious strength as a logistical partner. DHL operates 498 vehicles in the Middle East today, and has seven aircraft of its own—including a Boeing 757 freighter which averages around 160 flights per week within the region. DHL also employs 1582 people within the Middle East.

A visit to DHL’s offices at the Dubai Airport reveals a busy call centre which handles an average of 2500 calls per day—it was in the middle of what was rapidly becoming a 3000+ call day when CRN interviewed Wild—and an indicator of how good service is, is measured by how many calls take longer than five seconds before they are answered. Three shifts operate the call centre 24 hours a day—this is a company that wants your call, your business, and to share information with you.||**||Keeping it sweet at customs|~||~||~|Another critical component of DHL’s business anywhere in the world, is the strength of the relationships it has with the various customs and tariff officials. Without those relationships, speed of delivery would be significantly impacted, so particular care has been paid to this aspect of DHL’s operations over time.

“If we need to get something into Saudi Arabia for tomorrow, we can do it, cleared and delivered, if that is what is appropriate to the customer’s model. If we need to get it there in five days time, we can get it there then, if that is what the customer wants.

If we have to get it there in five days time, and something goes wrong, so we have to stop and get it there in a day’s time, we can do that too,” said Wild.

In fact, Saudi Arabia is particularly DHL-friendly, it being the first place the company set up in the Middle East. Under the banner of its Saudi Arabian operation, SNAS, DHL struck up relationships with Saudi Arabian authorities 25 years ago. On the ground at all DHL facilities worldwide, local customs people are permanently on site, as part of the standard DHL operation; their involvement within the organisation itself ensuring that packages can move through the DHL system with the minimum of delay. ||**||Getting ready for e-commerce|~||~||~|But if the threat of slicker logistics and a sophisticated network isn’t enough to pique vendors’ interest, and raise concerns amongst all but the largest distributors, DHL also believes it has ironed out a lot of the hiccups in dealing with delivery of packages generated through e-commerce, too. “In the environment of e-commerce, in which we believe we are pretty advanced, we have set up a separate company globally to manage e-fulfilment. The essence of e-fulfilment, is that we need to be able to talk to the portal, or to the principal or whatever, but it is a question of being then able to close several loops,” Wild said.

“One of them is a billing loop, which is taken care of now—there are off-the-shelf solutions from the banks. Then, if the [order is taken and the company is carrying the stock], they can then confirm that order. But if it then goes, like it does in amazon.com’s model, to a supplier, then the supplier is going to be another loop which will say, ‘yes, I have that book, yes it is ready for dispatch and it will be ready for collection tomorrow afternoon’. There has then got to be another loop which says: ‘DHL, we want you to go at 3:00 to go and collect that shipment’. And as this is all happening, we have to give visibility to the guy who has made the order, to be able to track it. Whether we populate the amazon.com site, or we give amazon.com access to our tracking capability, we also have to be able to switch from an air waybill number to an amazon.com booking reference number, or whatever. So that loop needs to be closed. So there are four major loops. The actual fulfilment and movement is only part of it,” said Wild.

In the final analysis, DHL says it is all about being easy to do business with, and giving its customers peace of mind. Those are advantages which may soon represent a challenge to the traditional channel, which it had better start taking seriously.||**||